By Mercy Jiménez and Spencer Punnett
WASHINGTON, D.C. Although the prime mover in the push for U.S. covered bond legislation is a Republican (Rep. Scott Garrett of New Jersey), substantial support from the other side of the aisle will be essential for any success in the current Democrat-controlled Congress. That political reality gives special significance to positive statements made by Democratic members of the House Committee on Financial Services during the committee’s hearing on covered bonds earlier this week (Dec. 15).
Here are some examples from members’ opening remarks preceding testimony by expert witnesses on the topic:
- Rep. Melissa Bean (D-IL): “Establishing a U.S. covered bond market could be very helpful to the residential and commercial real estate markets, but [also to] other asset markets like public-sector loans and other consumer loans as well.”
- Rep. Bill Foster (D-IL): “We have to look at what provides over time the best stability and the best deal for consumers. And I think both of these lead to the covered bond market as a way forward.”
- Rep. David Scott (D-GA): “This type of loan [funding] could provide a sense of accountability for both the lender and the borrower … which could potentially decrease risky lending practices.” (Rep. Scott also highlighted the dynamic nature of the cover pools backing covered bonds, which permit problem loans to be “swapped out for better assets.”)
- Committee Chairman Barney Frank (D-MA): “I am struck by … the unanimity [here] that the European experience [with covered bonds] has been a good one — that it is instructive for us — that it gives us lessons, and that this is the case where acknowledging that something has been done in Europe has some useful lessons for us. We ought to go forward.”
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